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Chapter 12. Starting an Investment Partnership

The goal of this book was not simply to be another book about value investing; rather, my goal was to teach readers how to think about investing intelligently. Most investing mistakes are due to decisions made as a result of temperament and emotional factors rather than how smart you are.

When it comes to investment philosophies, the approach either resonates with you immediately or it doesn't. Many can learn and recite the value rhetoric with the greatest of ease. Unfortunately, merely saying something doesn't actually mean you are doing it. You're either able to remain patient and disciplined or you're not. You either view the stock market as a long-term creator of wealth or you don't. You either see the intelligence in buying a dollar for 50 cents and holding on or you don't. It's that simple.

One thing is clear. Value investing—past, present, and future—is about one thing: the practice of purchasing securities or assets for less than what they are worth. The process of investing in bargain securities provides the margin of safety. The margin of safety provides room for error, imprecise estimates, bad luck, or shelter from the surprises or shocks of the economy and stock market. As my friend Mason Hawkins of Southeastern Asset Management once told me, "Prepare to look stupid in the short run if you're value investing." I include this chapter to help those on the fence determine whether running an investment partnership is the right ...

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